Tuesday, June 17, 2014


(h/t Timothy B. Lee)

if there is a free market, you can count on someone trying to rig it to his advantage. 

What is a 51 percent attack and why is it a threat to Bitcoin's future?

But that could change if someone gained control of a majority of the network's computing power. This is known in the Bitcoin community as a 51 percent attack. And that has become an increasingly serious concern in recent months. Miners have organized themselves into pools that work together and share the proceeds of their efforts. And in June 2014, a mining pool called GHash gained slightly more than 50 percent of the network's computing power.
In principle, an group with a majority of the Bitcoin network's computing power can do two things that the system isn't supposed to allow. First, by refusing to approve anyone else's blocks, it can claim 100 percent of the rewards from mining — which amounts to millions of dollars per week — for itself. Second, it could reverse past transactions by rejecting blocks it had previously accepted. That would allow a "double spending attack," where members of the GHash pool could spend Bitcoins and then take them back later.

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